Photo: Kohl’s
Kohl’s goes all-in on Amazon returns
What began as a 100-store test in 2017 has blown up with the announcement that Kohl’s will accept returns for products ordered on Amazon.com at all of its 1,150 stores in 48 states.
“Amazon and Kohl’s have a shared passion in providing outstanding customer service, and this unique partnership combines Kohl’s strong nationwide store footprint and omnichannel capabilities with Amazon’s reach and customer loyalty,” said Michelle Gass, Kohl’s CEO, in a statement. “This new service is another example of how Kohl’s is delivering innovation to drive traffic to our stores and bring more relevance to our customers.”
Speaking on the chain’s fourth quarter earnings call last month, Ms. Gass said “how excited” Kohl’s customers were about the service and hinted at what was to come.
“It’s really unique. It takes a lot of the hassle out of returning items. It’s free. They don’t have to package it. The big question of course at hand is, how we go forward and we continue to be in conversations with Amazon. It really needs to be a win-win for both. So, I’d say stay tuned on that front,” she said.
The expansion of the Amazon return program is not the only recent change in the relationship between the two companies. Also announced last month, Kohl’s ended 30 dedicated pop-up shops operating inside its stores selling Amazon devices and expanded the products throughout the store in 200 locations.
“We had a great Black Friday (2018) with Amazon devices. And so the learnings that we’re taking in terms of how customers engage in the shop-in-shop, we’re actually going to bring it into a dedicated space in over 200 stores, as I mentioned, with a broader assortment of Amazon devices, but it will be more on a self-serve environment, which is how our customers are used to shopping us” said Ms. Gass via Seeking Alpha. “This was determined by both us and Amazon, and again we believe the products will be fantastic and the experience will be great for our customers.”
Discussion Questions
DISCUSSION QUESTIONS: What do you make of Kohl’s chainwide expansion of the free Amazon return program? How do you see the relationship between Kohl’s and Amazon continuing to evolve and what will it mean for rival retailers?
Poll
BrainTrust
Kai Clarke
CEO, President- American Retail Consultants
Oliver Guy
Global Industry Architect, Microsoft Retail
I’ve spoken to several retailer executives since the Amazon returns program launched, all of whom predicted that it would quietly fold. The main takeaway is that Kohl’s, under Ms. Gass’ leadership, is exhibiting the kind of agility and broad thinking that is required in today’s retail environment. Going back to the Amazon relationship, pulling back on the pop-up shops and doubling down on the returns counter sounds like the right direction overall. Amazon is more of a complementary business under this model and can continue to be, as Amazon carries all kinds of categories that are not core to Kohl’s business.
Absolutely agreed! The rule is, “As long as people live in bricks-and-mortar houses, they WILL be shopping in bricks-and-mortar stores.” Amazon is a genius at algorithmically closing the sale (1-Click and Amazon Go.) See: Selling Like Amazon… in Bricks & Mortar Stores!.
The “game” has only just begun …
Amazon is not smart in the brick and mortar. They tried with the Amazon Kiosks and now Amazon is going to close all of them. Amazon was not also able to compete in China and had to give up. So I guess the next step will be a partnership first (to understand how brick and mortar really works. The same thing that Amazon does in its marketplace — it checks which products sell more and then copies them to sell as its own brand) and after the partnership, once Amazon understands how it works … we’ll see a takeover.
Amazon just made it easier to do business with them. Kohl’s just added another level of foot traffic through their stores. I don’t know the economic arrangement between these two companies, but I’m sure it’s good for both sides.
This sounds pretty simple. Kohl’s tested the concept and it worked. And they are wasting no time in making it a big deal. Amazon is one of the largest portals to the customer on the planet and Kohl’s is making sure it is part of that relationship. It’s relevant to yesterday’s conversation about cannibalizing. That risk is present but so is the opportunity for upside. Kohl’s found some upside and is now pedal to the metal.
It says to me that the pilot program generated enough traffic for Kohl’s to be worthy of expansion. Pretty simple. For Amazon, this is also a win as costs for picking up bulk returns are lower than individual shipping. Longer term, Kohl’s just has to be smart enough to only sell Amazon products that don’t directly compete with their product mix (which I think they are).
Smart, smart, smart. It takes quite a bit of humility and savvy to work with the 800-pound gorilla. Good for Kohl’s for having that combination – to make lemonade from lemons. Amazon is not going away. So Kohl’s is embracing them, and driving massive foot traffic to their stores. That means when someone drops off a return at Amazon’s cost, Kohl’s has the potential to pick up an impulse sale. Nice thinking.
What is means for everyone else is that you better start partnering. Omnichannel (BOPIS) is here. If you are not already onboard, find a way to make it happen. Then do the smart thing of partnering with other retailers (even your competitors). Forging relationships like the Kohl’s/Amazon one makes it convenient for shoppers. The most convenient retailer wins!
Boy, talk about sweetening the acquisition pot. Kohl’s is the perfect physical growth vehicle for Amazon: “Goldilocks” size (not too big, not too small), built in good demographic areas, mostly free-standing (to add BOPIS), plus I’d bet most of their customers are already Prime users. And obviously the execs are already communicating nicely. Win-win.
The true sign this will happen will be when those “4-Star” shops start showing up inside Kohl’s. It’ll only be an Alexa moment after that happens.
I second that prediction, Lee.
When the Kohl’s/Amazon partnership began, the conventional wisdom (including among some RetailWire panelists) was that Kohl’s was “sleeping with the enemy.” But early sales data in test markets suggests that comp-store sales improved significantly where Kohl’s accepted Amazon returns. (Hat tip to Rick Romell of the Milwaukee Journal Sentinel for citing the findings from Earnest Research in his coverage of Kohl’s.)
The speed of the rollout — from a handful of stores in Chicago, L.A. and Milwaukee — speaks volumes about the success of the initiative. One open question — the expense impact of the initiative — needs to be answered, but Kohl’s already handles a large number of its own e-commerce returns in its brick-and-mortar locations.
Right now it’s a win for Kohl’s in terms of driving traffic. But will the relationship last? Amazon could open other return centers with other retailers to expand national coverage. Or returns programs could be part of Amazon’s own store expansion plan. Rest assured that returns at stores have not gone unnoticed as Walmart rapidly expands online. The Kohl’s returns expansion is another indicator why Amazon needs a physical presence. The clear winners are the customers who receive services beyond and after the initial sale.
Kohl’s has stated that this relationship is driving store traffic. So this is a win for Kohl’s and a win for the customer as it makes returns simple. Amazon certainly has the wherewithal to buy Kohl’s if they see a strategic fit for building their fashion business further.
If Amazon choses to deepen this relationship and move ahead with either an outright purchase or some sort of product assortment agreement, this would put pressure on other retailers who have not developed as strong a relationship with the consumer as Amazon has done. It could be a brick-and-mortar game changer.
Smart, smart, smart. Kohl’s is using Amazon’s reach to bring new customers into their stores by simply offering an easy drop point for their returns. It is amazing that other stores have not worked with Amazon to do this. Kohl’s can only win with this partnership, and the cost is so limited (just someone to confirm the product drop off and managing the UPS/USPS/FedEX pick-up). When you consider the cost to promote the brand to attract current and new customers, this business model clearly offers a tremendous upside for Kohl’s.
It is nice to see a retailer thinking outside the retail box. I think it will go a long way with existing Kohl’s customers. I’m not nearly as convinced that it will increase the store’s acquisition of new customers. Kohl’s is not Amazon.
But I am reminded of something Will Rogers said when FDR was first elected, right in the throes of the Great Depression. Will said, “Well, if when he gets into the White House it catches fire and burns to the ground, we will say at least he got something started.”
The willingness of Kohl’s to try anything with a gossamer wisp of possible success is the real story here. Kohl’s might just be the one retailer to survive this retail climate change.
As a retailer, if the customer doesn’t have a better reason to come to your store than to return something they bought from another retailer, then you likely have a BIG problem on your hands. Sure, this will likely generate some traffic. But unless there’s a great experience awaiting them in the store don’t expect them to do anything but return the item and then leave. A return depot is just that … a depot.
And the cynic in me questions why anyone would let Amazon inside their doors … anyone recall the Trojan Horse story?
This expansion is certainly great for the consumers and Amazon. I am sure also for Kohl’s, as they first tested it and now announced the rollout to all of their outlets. The question is, what will it bring to Kohl’s in the long run? I am sure other retailers will follow the path of Kohl’s and there will be no USP for Kohl’s anymore. So the question will be, what will be in it for a physical retailer in the long run who enters into such partnership? We see similar developments/initiatives here in Europe.
This is a good arrangement for both Amazon and Kohl’s. Returning an online purchase has always been a pain point. Packing it up, paying for shipping, etc. An in-store return option will certainly help Amazon customers who live near a Kohl’s. For Kohl’s this arrangement brings in more foot traffic and likely more sales. It’s a win for both and may be laying the groundwork for more integration as Amazon continues to explore brick-and-mortar opportunities and as Kohl’s looks to innovate.
Kohl’s CEO is pursuing non-traditional ways of increasing the chain’s sales. By piloting the Amazon program, Michelle Gass increased store traffic and sales to warrant full rollout across the chain.
The evolving competitive landscape in retail requires new thinking and action frameworks that break traditional boundaries while creating new value propositions for consumers. I expect deeper collaboration between the two companies.
After a two-year test, Kohl’s has determined that Amazon returns are good for their business. While the details aren’t disclosed, it appears that Kohl’s experienced incremental sales in stores where Amazon customers returned goods. As consumers enter the store to return their items, many likely shopped and purchased additional items at the store. It is a great way to generate incremental store traffic and sales. My one concern is “they don’t even have to package it.” This may be hard to sustain.
A next logical extension of the Amazon relationship may be to add Amazon pickup lockers or another alternative for customers to pick up Amazon merchandise at Kohl’s stores. Other retailers may be interested in jumping on this wagon to spur incremental sales.
Kohl’s sees itself as a self-service store. Ms. Gass explains that Kohl’s is “more of a self-serve environment, which is how our customers are used to shopping us.” Further Ms. Gass explains “we believe the [Amazon devices] will be fantastic and the experience will be great for our customers.”
The curious conflation of self-serve shopping and the great Kohl’s customer experience is openly acknowledged via Amazon in-store returns and Amazon devices. On the surface it’s promoted to be the new-new of Kohl’s. A reason to drop on by Kohl’s. Below the surface, there is likely some evidential behavior being mis-characterized to prop up Kohl’s. A consideration?
One of the common themes among retail experts these days is the lack of innovation and retailers need to evolve and try something new. That’s what Kohl’s did. Kudos to Kohl’s for taking a risk, putting a pilot in market to test and acting upon the results.
Fascinating. This makes a lot of sense as yet another example of a retail ecosystem. What could be interesting is the expansion to become an Amazon pickup point as well. The big driver for Kohl’s has got to be around driving sales out of the additional traffic coming into the store – they need to have a “convenience mentality” of attempting to sell customers something they did not come into the store for.
Win/win for both parties. Another logistics option for Amazon that underscores its commitment to seamless customer service. For Kohl’s, a terrific differential advantage. Brings Amazon traffic into its stores with an opportunity to showcase Kohl’s offerings.
Other retailers should take notice. Sometimes it’s more prudent to collaborate versus engage in a costly war.
Not only does this make sense in terms of driving footfall to Kohl’s stores, it makes sense because it drives younger footfall to Kohl’s stores – the kind of demographic it doesn’t already attract. As part of a broader strategy, Kohl’s is doing things to attract more Millennial shoppers, such as introducing new brands and ranges. This is part of Michelle Gass’ holistic thinking about how to keep Kohl’s relevant.
I remain skeptical this is driving any meaningful foot traffic to Kohl’s let alone boosting sales. While it certainly doesn’t hurt Kohl’s to implement it nationally — any traffic is better than none — it seems hard to believe this is the wunderkind idea many paint it to be.
Amazon returns are a tiny, tiny portion of their overall sales (it allotted just $627 million for return allowances last year globally for $207 billion in retail revenue), but there are numerous ways of returning a package to Amazon instead of having to run to the nearest Kohl’s to do so. The local post office is a heckuva lot closer than Kohl’s. Amazon even has launched a package-less return policy too where you can keep the item instead of sending it back (as well as banning those who return too much).
Granted, Kohl’s does the repacking and shipping for you, but the number of people availing themselves of this doesn’t seem like it can amount to very many people running in to the retailer then turning around and buying something while there.
Again, it’s not a bad policy, it just seems like a neutral program at best in terms of sales and traffic.
Smart. Very smart. Clearly Kohl’s has seen tangible value from the foot traffic generated by Amazon returns to make the decision to go nationwide. This is a win-win for both Kohl’s and Amazon on that point alone. But they didn’t just stop there. Pulling the pop-ups out is no cause for concern – I believe Amazon pulled these because the focus was on introducing their devices to consumers. By now, they’ve accomplished that. The products can be integrated into Kohl’s product mix much more readily. In fact, as others have said there, I would not be surprised to see a future Amazon 4-Star store-within-a-store appear inside Kohl’s. Just imagine a Kohl’s with an Aldi on one side, an Amazon return section in another area, and a 4-Star on the other side, with Kohl’s “standard” merchandise mix in the middle. It’s a redefinition of the department store in the murky middle segment of the market that we’ve been waiting to see!
My mom used to have a saying for this — “it’s cheaper to milk a cow than buy one.” That is, if everything Amazon is looking for from Kohl’s comes at a low cost, why do they need to move forward with anything else? I’m sure Kohl’s is keeping their fingers crossed for a deeper relationship, but Amazon will only drive from the data, numbers and performance that makes sense.
It’s a solid idea, which should drive incremental traffic, which Kohl’s desperately needs. My experience working with other retailers, principally on the ROI of accepting their own online returns, is that the incremental sales lift offsets the incremental operating cost. One issue (and it’s hardly unique to the Kohl’s/Amazon partnership) is the increase in BOPIS and BORIS is causing many to have to rethink their store layouts and operating models, which could cause a real ripple effect on the overall customer experience.
Big picture, we shouldn’t confuse necessary with sufficient. This is a good initiative, but Kohl’s will only win over the long term by moving more decisively out of the boring middle. This is but a small step on their journey to remarkable.
A very daring plan if there is no merger/acquisition idea in place. Nevertheless, it is working in a 21st century kind of way. Demonstrating that convenience, brick and mortar and e-commerce are in fact what retail is for the now. Wouldn’t you just love to see the financial structure of this takeover err/uh I mean deal?
It beats a gym.
What retailer isn’t anguishing over the downturn in traffic? No one — all are freaking. Therefore, this is brilliant. Any lost traffic is somewhat replaced by these folks moving in their stores. And, as Kohl’s rationalizes its assortment and selling space requirements, this is a great use of the freed space, whatever Amazon’s lease obligations are.
Now, can Kohl’s convert the traffic? Is the Kohl’s selling model relevant to that traffic? Therein lies the rub. Or as we like to say, “retail ain’t for sissies!”
With 1,150 stores across America this is a great result for customers, Amazon and yes, Kohl’s as well. It overcomes one of the biggest negatives to shopping online — the hassle of returning goods. It also drives large numbers of potential customers to Kohl’s stores and is even environmentally friendly if it reduces the number of delivery vehicles in residential areas.
The interesting thing in this article is the statement from Ms. Gass: “The big question is, how we go forward.” This should be a big alarm bell to many traditional and online retailers as the two mammoths working together could cause major problems for many of their competitors.
Kohl’s has around 1,100 stores in the USA. Kohl’s has a market value of 11B$ and 20B$ revenue (market value/revenue= 0.55) and a net debt around 2B$. Last month Alibaba started a “collaboration” with Office Depot. Office Depot has around 1,350 stores in USA. Office Depot has a market value about 1.3B$ and 11B Revenue (market value/revenue = 0.12 vs 0.50 of Kohl’s). Office Depot has around 170M$ net debt.
Why did Amazon chose a much more expensive partner with fewer stores? Is a Brick and Mortar takeover battle going to start?
BABA could enter into USA with a very small investment. The Office Depot takeover should cost less than 2B$ and with a such a small investment Baba could get 11B$ more revenue, positive earnings, more cash flow plus a strong presence in USA with 1350 stores. It sounds strange to me that Amazon didn’t have even 2B$ cash to get quickly 1,350 stores plus 11B$ revenue, and preferred to partner with a much more expensive company with fewer stores. I think we’ll soon see a brick and mortar takeover battle….
It’s a stark contrast to consider what Kohl’s is doing with Amazon against JCP’s move to stop accepting Apple Pay. It’s Retail Darwinism and indicative of who will be around in the next 3-5 years and who will be gone or going.